Local Co. has sales of $10.4 million and cost of sales of $5.7 million. Its selling, general and administrative expenses are $530,000 and its research and development is $1.3 million. It has annual depreciation charges of $1.3 million and a tax rate of 25%. a. What is Local's gross margin? b. What is Local's operating margin? c. What is Local's net profit margin?
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
It is given that:
sales = $ 10.4mil
Cost of sales - $ 5.7 mil
Administrative expenses = $530,000
RnD = $ 1.3 mil
Annual dep = $1.3 mil
Tax = 25%
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